Not legal advice. Requirements may change — always verify with your local government authority before applying. Last verified: .
The quick answer
- 1Form your LLC by filing Articles of Organization with your state's Secretary of State. The filing fee ranges from $40 (Kentucky) to $500 (Massachusetts) — most states are $50–$150. You can do this online in about 15 minutes.
- 2After formation, get an EIN from the IRS (free, instant online), write an operating agreement, and open a dedicated business bank account. These three steps are what actually make the LLC work as intended.
- 3Most LLCs formed after January 1, 2024 must file a Beneficial Ownership Information (BOI) report with FinCEN within 90 days of formation. This is a new federal requirement many new owners don't know about.
- 4An LLC doesn't replace industry-specific licenses — you still need a business license, seller's permit, and any professional licenses your industry requires. The LLC is the foundation; permits are built on top of it.
1. Why form an LLC?
The primary reason is liability protection. When you operate as a sole proprietor, every business debt and lawsuit can reach your personal assets — your bank account, your car, your house. An LLC is a separate legal entity, and when it's properly maintained, business liabilities generally stay with the business.
The secondary reason is credibility. Many vendors, landlords, and larger clients prefer or require working with a registered business entity. A business bank account under an LLC name (rather than your personal account) signals that you're running a real operation.
An LLC isn't always the right choice. If you're testing a business idea with minimal revenue and no meaningful liability exposure, a sole proprietorship costs nothing to set up and is fine for the early stage. If you expect to raise outside investment, a C-corporation (not an LLC) is typically what investors want to see. But for the vast majority of small service businesses, freelancers, consultants, and side businesses, an LLC is the right structure.
LLC vs. other structures: a quick comparison
| Structure | Liability protection | Tax treatment | Setup cost |
|---|---|---|---|
| Sole proprietorship | None | Schedule C | $0 |
| LLC (single-member) | Yes | Schedule C (default) or S-corp election | $40–$500 |
| LLC (multi-member) | Yes | Partnership (default) or S-corp election | $40–$500 |
| S-Corporation | Yes | Pass-through with payroll | $100–$800+ |
| C-Corporation | Yes | Double taxation | $100–$800+ |
2. How to form an LLC: the complete process
Step 1: Choose your state
Form your LLC in the state where you do business. If you live in California and operate there, form in California. The appeal of Delaware or Wyoming is real for larger companies and investors, but for a small business operating in one state, forming elsewhere means paying fees in two states and dealing with two sets of compliance requirements. Form where you operate.
Step 2: Choose a business name
Your LLC name must be distinguishable from existing LLCs in your state and must include a designator — "LLC," "L.L.C.," or "Limited Liability Company." Check your state's business name database on the Secretary of State website before filing; if the name is taken, your application will be rejected and you'll lose the filing fee. Also run a quick trademark search at USPTO.gov to confirm you're not stepping on a registered trademark. If you want to operate under a different name than your LLC name, you'll file a "DBA" (doing business as) or fictitious business name separately — typically at the county level.
Step 3: Appoint a registered agent
Every LLC must have a registered agent with a physical address in the state — someone who can accept legal documents during business hours. You can serve as your own registered agent using your home or business address, but this puts your address in public records. Many owners prefer a registered agent service ($50–$150/year from providers like Northwest Registered Agent or ZenBusiness) to maintain privacy and ensure nothing gets missed while traveling.
Step 4: File Articles of Organization
This is the actual formation filing. You'll provide your LLC name, registered agent information, the names of the members or managers, and your business address. Most states let you file online in about 15 minutes. The filing fee is your main cost — see the state-by-state fee table below. Once approved, you'll receive a stamped copy of your Articles, which serves as proof of formation.
Step 5: Get an EIN from the IRS
An EIN is your LLC's federal tax ID. You need it to open a business bank account, hire employees, and file business tax returns. Apply at IRS.gov — the online application takes about 5 minutes and issues the EIN immediately. Never pay a third party to get an EIN; the IRS application is free and straightforward.
Step 6: Write an operating agreement
An operating agreement governs how your LLC functions: how profits are distributed, who manages the business, how decisions are made, and what happens if a member wants to exit. For single-member LLCs, it also reinforces the legal separation between you and the business — courts have occasionally pierced the corporate veil when no operating agreement existed. Free templates are widely available online for single-member LLCs; multi-member LLCs benefit from a custom agreement drafted by an attorney.
Step 7: Open a business bank account
This step is not a legal requirement, but it's critical in practice. Co-mingling personal and business funds — depositing business revenue into your personal account — is one of the fastest ways to undermine the liability protection an LLC provides. Courts look at whether the LLC was actually operated as a separate entity, and mixed finances are a red flag. Open a dedicated business checking account using your EIN and Articles of Organization as documentation.
Step 8: File the BOI report with FinCEN
Under the Corporate Transparency Act, most LLCs must file a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN). You disclose who owns or controls the LLC — names, addresses, and ID document numbers. LLCs formed in 2024 and later must file within 90 days of formation; existing LLCs had a January 1, 2025 deadline. The filing is free at FinCEN.gov. Failure to file can result in penalties up to $591 per day. Note: BOI rules have been subject to ongoing legal challenges — check FinCEN.gov for current requirements.
3. LLC filing fees by state
State filing fees vary significantly. Here are the most common states:
| State | Filing fee | Annual report fee | Notes |
|---|---|---|---|
| California | $70 | $20 + $800 minimum franchise tax | $800 franchise tax waived year 1 (new LLCs) |
| Texas | $300 | No fee (franchise tax if over threshold) | No franchise tax for most small LLCs |
| Florida | $125 | $138.75/yr | Annual report due May 1 |
| New York | $200 | $9 biennial | NY requires newspaper publication (~$500–$2,000) |
| Delaware | $90 | $300/yr | Popular for multi-state or funded companies |
| Wyoming | $100 | $60/yr minimum | Strong privacy protections |
| Illinois | $150 | $75/yr | — |
| Georgia | $100 | $50/yr | — |
| Washington | $200 | $60/yr | B&O tax applies to most businesses |
| Colorado | $50 | $10/yr | One of the cheapest states to maintain |
Fees subject to change. Verify current amounts at your state's Secretary of State website before filing.
4. Common LLC formation mistakes
Mixing personal and business finances
This is the #1 way to lose your LLC's liability protection. Courts apply a doctrine called "piercing the corporate veil" — if you treat your LLC's money as your own personal piggy bank, a judge can too. Use a separate business bank account for all business income and expenses. Pay yourself a salary or owner's draw, but keep the accounts separate.
Forming in Delaware or Wyoming when you operate locally
This is a popular pitch from formation services charging for Delaware filings. The reality: if you do business primarily in your home state, you need to register as a foreign LLC there anyway. You pay two sets of filing fees, two registered agents, and deal with two states' compliance calendars. Delaware and Wyoming advantages are real — for investors, corporate governance, and certain legal contexts — but not for a local service business. Form in your home state.
Forgetting annual report filings
Most states require an annual or biennial report and fee to keep your LLC in good standing. Missing the deadline results in late fees and, eventually, administrative dissolution — which means the state cancels your LLC. Set a calendar reminder for your state's filing deadline the day you form your LLC. Fees range from $9 to several hundred dollars depending on state.
Thinking the LLC replaces other business licenses
Your LLC registration is a state-level entity filing. It does not serve as a business license, tax registration, or professional license. You still need a local business license from your city or county, a seller's permit if your state taxes your services, and any industry-specific licenses your business requires. The LLC is the foundation; everything else gets applied on top of it.
Missing the BOI filing deadline
The Corporate Transparency Act's BOI reporting requirement is new enough that many LLCs formed in 2024 and early 2025 missed it entirely. The penalties are not trivial — up to $591 per day of noncompliance plus potential criminal penalties for willful violations. File within 90 days of formation at FinCEN.gov. It takes about 10 minutes.
5. Find your state's LLC filing portal
Use these StartPermit state guides to find the direct link to your state's LLC filing system, current fees, and annual report requirements.
Frequently asked questions
How much does it cost to form an LLC?
The filing fee for Articles of Organization varies by state: Kentucky charges $40, while Massachusetts charges $500. Most states fall in the $50–$150 range. If you use a formation service like ZenBusiness or Northwest Registered Agent, add $0–$150 for their service fee on top of the state filing fee. Ongoing costs include annual report fees ($0–$800 depending on your state) and registered agent fees ($50–$150/year if you use a service).
What's the difference between an LLC and a sole proprietorship?
A sole proprietorship is the default legal structure for a one-person business — you get one automatically just by operating. The critical difference is liability: in a sole proprietorship, your personal assets (savings, car, home) are fully exposed to business debts and lawsuits. An LLC creates a separate legal entity, so business liabilities generally stay with the business rather than following you personally. An LLC also looks more professional to clients and vendors and makes it easier to open a business bank account.
Do I need a lawyer to form an LLC?
No. Forming an LLC is a straightforward administrative process in every state — you file a form (Articles of Organization), pay a fee, and appoint a registered agent. Most business owners do it themselves through their state's Secretary of State website, or use a low-cost formation service. You might want a business attorney to help draft a custom operating agreement if you have multiple members with complex ownership arrangements, but for a single-member LLC, a template operating agreement is typically sufficient.
How long does it take to form an LLC?
Online filings through your state's Secretary of State website typically process in 1–5 business days. Many states offer same-day or next-day expedited processing for an additional fee ($25–$100). If you mail a paper filing, add 2–4 weeks for processing time. Some states — California being the primary example — have slower processing times during peak periods.
What is a registered agent and do I need one?
A registered agent is a person or company with a physical address in your state who agrees to receive legal documents (lawsuits, government notices) on behalf of your LLC during business hours. Every state requires you to have one. You can serve as your own registered agent if you have a physical address in the state and are available during business hours — but many business owners use a registered agent service ($50–$150/year) to keep their home address off public records and ensure nothing gets missed.
Do I need an operating agreement for an LLC?
Most states don't legally require an operating agreement, but you should have one. It defines how your LLC is managed, how profits are divided among members, what happens if a member wants to leave, and how major decisions are made. Without one, state default rules apply — and those defaults aren't always what you want. For single-member LLCs, an operating agreement also reinforces the legal separation between you and the business, which matters if the liability protection is ever challenged in court.
What is an EIN and do I need one for an LLC?
An EIN (Employer Identification Number) is a federal tax ID for your business, issued free by the IRS. You need one to open a business bank account, hire employees, and file certain business taxes. Single-member LLCs with no employees can technically use the owner's Social Security number instead, but getting a separate EIN is almost always the better practice — it keeps your SSN out of more hands and makes business banking cleaner. Apply at IRS.gov; it's free and takes about 5 minutes.
Can I form an LLC in a state other than where I live?
Yes, but it's usually not worth it for a small domestic business. Delaware and Wyoming are frequently marketed as favorable states because of their business-friendly courts and low fees. But if you operate your business primarily in your home state, you'll need to register as a "foreign LLC" in your home state anyway — paying registration fees in both states and maintaining two registered agents. The benefits of Delaware/Wyoming rarely outweigh the added complexity and cost for a single-state small business. Form in the state where you actually do business.
What is the BOI report and does my LLC need to file it?
The Beneficial Ownership Information (BOI) report is a federal filing requirement under the Corporate Transparency Act. Most LLCs formed after January 1, 2024 must file a report with FinCEN within 90 days of formation disclosing who owns or controls the LLC. LLCs formed before 2024 had a deadline of January 1, 2025. The filing is free and done through FinCEN's online system. Failing to file can result in significant penalties. Check FinCEN.gov for current deadlines and exemptions — some rules have been subject to ongoing litigation.
How is an LLC taxed?
By default, a single-member LLC is taxed as a "disregarded entity" — meaning all income flows to your personal tax return and you pay self-employment tax plus income tax. A multi-member LLC defaults to partnership taxation. You can elect S-corp taxation for your LLC once it's profitable enough that the savings on self-employment tax exceed the cost of running payroll — this threshold is typically around $50,000–$80,000 in net profit. Consult a CPA to determine if and when an S-corp election makes sense for your situation.